How Walmart, Chipotle are splitting the wealth of record stock market

Chipotle and Walmart have been among the movers in the universe of big U.S. corporations when it comes to raising pay and offering debt-free college tuition assistance to large, low-wage workforces. Now, they’re sharing another tactic the companies say will have a long-term payoff for employees: publicly traded stock splits.

In a rapidly rising stock market, splitting shares is not a surprise. Before its split, Walmart shares were near an all-time high around $170. Chipotle, even further out on the market chart, has shares nearing $3,000 — its stock split is to be effective June 26.

Walmart’s 3-for-1-stock split, completed on Feb. 26, was its first in over 20 years. In its formal announcement, the company said that in addition to an “ongoing review of optimal trading and spread levels” the company made the move based on a “desire for its associates to feel that purchasing shares is easily within reach.”

For Chipotle, it’s the first stock split in the company’s 30-year history, and its announcement echoed Walmart’s. Both are hoping, through the availability of an employee stock purchase plan and financial education, they’ll get more workers to invest.

But it may not be so simple, according to benefits consultants.

Certainly, having a lower share price broadens ownership opportunities for employees to buy company stock, but it remains to be seen whether more rank-and-file workers will take advantage of company stock ownership opportunities. 

“The idea that all of these employees are going to rush out to the market and start buying equity frankly doesn’t hold a lot of water,” said Michael Kestenbaum, managing director of Gallagher’s executive compensation practice.

Though a stock split can make shares more affordable, there are other factors at play, including how heavily a company promotes its ESPP, availability and employee usage of employer-sponsored financial education, and competing financial interests among lower-level employees, many of whom may be struggling to make ends meet.

Both companies say the split is being combined with other efforts to encourage employee stock ownership, including access to discounted stock through an ESPP and financial education offerings. 

ESPP versus fractional shares

Even without a stock split, employees could have already purchased shares of their company, or at least fractional shares, through a brokerage account. But in some ways, ESPPs are preferable since the money comes directly out of an employee’s paycheck and there’s often a sizable employee discount. Walmart’s associate stock purchase plan, for example, allows eligible associates to buy stock through payroll deductions and provides a 15% company match on the first $1,800 each year. 

Chipotle, meanwhile, offers a quarterly opportunity to buy its common stock at a price of 92.5% of the lower of the fair market value on the first and last trading days of each offering period, according to a regulatory filing

What’s more, owning fractional shares has…

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